Last week the Chancellor, Rishi Sunak, temporarily raised the minimum stamp duty threshold to £500,000 in an attempt to boost the property market and help buyers who are struggling to move because of the financial crisis caused by the virus.
What has Changed?
Stamp Duty Land Tax came into force in December 2003, as a tax paid by people buying property across England and Northern Ireland.
On 8th July the Chancellor announced a temporary increase to the threshold at which buyers are required to pay stump to £500,000 on property sales in England and Northern Ireland. The temporary changes in the Stamp Duty threshold is applicable to anyone completing a transaction on a property for residence costing up to £500,000 between the 8th July 2020 and 31st March 2021. So, what does this mean?
The increase in the stamp duty threshold means that buyers who have purchased a property up to £500,000 will not have to pay any stamp duty on their property. The increase of the minimum threshold will mean 9/10 buyers will not pay any stamp duty on their property and have the possibility to save as much as £15,000 at purchase.
So why has the government implemented such a change?
In an attempt to kick-start the economy back into action in response to the economic downfall caused by the virus, the government believes this is a way of attracting buyers back to the property market in the second half of 2020.
The unexpected move that was part of a more comprehensive economic plan was introduced to help buyers who were previously financially held back due to the economic impact of the virus. At the same time, the intended plan has been introduced to provide an avenue back into the property market for thousands of people. The intended increase in market activity that the stamp duty holiday promotes is hoped to have a wider positive impact in aiding the UK’s economic recovery.
What does this mean for buy-to-let properties?
Although this announcement has been designed to promote sales in the private sales market, the stamp duty holiday has a distinct benefit for those buying a second home or a buy-to-let property.
The stamp duty holiday applies to buy-to-let and second homes purchases, but buyers will have to continue to pay the 3% surcharge at all levels of purchases including below £500,000. Whilst, the surcharge is still attached to stamp duty rates, the announcement by Chancellor dramatically makes it cheaper for investors to increase their property portfolio on mid-level properties.
For those looking to invest in buy-to-let property, seeing how much can save using a stamp duty calculator may sway your opinion in favour. You can see how this stamp duty holiday benefits landlords and investors below.
|
Property Purchase Price |
Stamp Duty Rates |
|
£0 - £500,000 |
3% |
|
£501,0000 - £925,000 |
8% |
|
£925,001 - £1.5million |
13% |
|
£1.5million+ |
15% |
Whilst it is too early to tell who and where will benefit the most out of this announcement, landlords and London estate and lettings agents will expect to see one of the most significant benefits due to the collection of properties in the city.
How does this benefit landlords and investors?
Although landlords and property investors are still required to pay a 3% surcharge on any second home purchases, those purchasing a property under £500,000 will pay no extra duty.
The cut in stamp duty rates have been introduced to promote hesitant buyers back to the market, and there is no doubt property investors will undoubtedly return in their droves to take advantage of this opportunity. Whilst some investors have been waiting to see how property prices rebound in the future, this temporary tax break may have swayed some minds into returning sooner than they thought.
In comparison to the private sales market, the rental market has been far more flexible in adapting to the challenges raised by the coronavirus. As the property market has fully re-opened and demand for rental property continues to skyrocket, this announcement by the Chancellor has created an environment which is favourable for investors and landlords going forward.
The increased market activity that is predicted from this announcement looks to benefit’s the wider property market and the economy as related industries will indirectly benefit from increased transactions rate and a healthier market environment. Whilst there are concerns this will unnaturally inflate property prices once this brief holiday ends, the property market has widely accepted this announcement with open arms
